Ratings agency ICRA expects higher mergers and acquisitions (M&A) and refinancing activity in HAM projects to gain traction in the coming quarters. About 105 HAM projects involving bid project cost of Rs 1.22 trillion are expected to become operational in the next two years of which Rs 0.90 trillion of debt linked with these projects could be refinanced. Around 280 projects with a total bid project cost (BPC) of Rs 3.21 trillion were awarded under HAM model till September 2022 since its introduction in January 2016. HAM accounted for 40 per cent of the total projects awards by the NHAI during FY2016 and H1 FY2023. Further, HAM is expected to account for around 45-50 per cent of the NHAI awards in FY2023 and FY2024. Of the HAM projects awarded since January 2016, a total of 71 projects with cumulative BPC of Rs 808.18 billion became operational during FY2019-H1FY2023. Of this, 23 projects with a cumulative BPC of Rs 274.46 billion were sold to InvITs and private equity players in the last two years. Giving more insights, Vinay Kumar G, Vice President, Corporate Ratings, ICRA, said, “The valuation of HAM projects has sweetened in the recent quarters with hardening in interest rates as annuities in HAM assets are linked with RBI’s bank rate, which is on an upward trajectory. Once a HAM project becomes operational, the risk profile witnesses significant improvement upon completion and track record of 1-2 semi-annuities. The developers are looking at refinancing to reprice their debt or avail top-up loans for future equity commitments.” HAM as a model has evolved over the years since its introduction in January 2016. The interest on annuities for HAM projects is sizeable, amounting to around 45 per cent of overall inflows during the concession period. With the average MCLR replacing the bank rate, there will be a natural hedge between the annuity inflows and interest costs, thereby reducing the interest rate risks to a large extent. Also, the payment milestones were increased from 5 to 10 to improve the cash conversion cycle for developers.